Thumbs Up on Kansas Income Tax Cut

A big, pro-entrepreneur, pro-small business thumbs up to Kansas Governor Sam Brownback for signing and state legislators for passing an income tax cut that will reduce the state's income tax rate in 2013 from 6.45% to 4.9%. That reduction in the personal income and individual capital gains tax rates will make Kansas more competitive. For good measure, as The Wall Street Journal notes, the legislation "will eliminate income taxes on non-wage income for about 191,000 small businesses."

Less Spending in Kansas

Kansas was in a political standoff due the state’s budget.

Tax refunds and pay for state workers were in jeopardy this week. But Governor Kathleen Sebelius, a Democrat, and Republican state lawmakers came to an agreement.

Sebelius signed a bill that will reduce spending in the current fiscal year, though she vetoed some spending cuts.

The February 17 Kansas City Star noted:

The bill Sebelius signed erases the state’s $200 million current-year budget deficit and gives lawmakers a head start toward eliminating $1 billion worth of red ink in next year’s budget.

Because of a cash-flow problem, the state had only $10 million in its checking account Monday morning — not enough to cover payroll, tax refunds and other state bills.

Sebelius had proposed borrowing the money from other state funds, but Republican leaders balked. They called on her to sign their budget reduction bill to ensure the state would have money available to repay the internal loans…

The budget reduction bill trims most state agencies by 4.25 percent. For public universities and colleges, the cuts amount to $34 million. Social services for the poor and vulnerable saw relatively few reductions.

What a novel idea? That is, fiscal responsibility. Reducing government spending in response to budget shortfalls, and apparently, no tax hikes.

Other states – and for that matter, the federal government – should take note of what just happened in Kansas.

Raymond J. Keating
Chief Economist
Small Business & Entrepreneurship Council